This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Putting a Price on 'Too Big To Fail': Street Whispers

Stocks in this article: FII IVZ

NEW YORK ( TheStreet) -- Money market funds have come a lot closer to losing their implicit government guarantee in recent days, so the fact that shares of Federated Investors (FII) have lost just about 2% since the latest news broke is a bit surprising.

The latest news refers to the apparent softening stance of Luis Aguilar, a Democratic Commissioner at Securities and Exchange Commission and former general counsel at fund giant Invesco Ltd. (IVZ) who in August cast the decisive swing vote against proposed reforms. The Wall Street Journal reported Friday Aguilar would consider a rule requiring money market funds to report daily fluctuations in their value just like any other mutual fund.

The fund industry, led by Federated and Fidelity Investments has fought this change fiercely since it would alert investors to the fact that a money market fund is riskier than a bank account. That awareness, in turn, would lessen the likelihood the industry would require a bailout, as it received in 2008 after an investment in short-term debt of Lehman Brothers led to a run on the $62 billion Reserve Primary Fund.

No publicly traded company would appear to have more at stake in the battle over money market fund regulation than Federated, which gets more than 40% of its revenue from money market products. But Bulent Ozcan, analyst at RBC Capital Markets, says it will take some time before Federated sees any hit to profits from a new rule.

Ozcan has an underweight recommendation on Federated and a $16 price target, largely as a result of the reform threat. Still, he doubts Federated shares will trade lower than $16, about 19% below Monday's close. He wasn't surprised by the muted reaction to Aguilar's softened stance, as he notes a rule still has to be proposed, passed and then implemented, which will likely take a good deal of time. Even after that happens, he doesn't expect investors to abandon money market funds en masse. He also believes Federated shareholders weren't that surprised by the renewed momentum for money fund reform, given that the Financial Stability Oversight Council, comprising all the top regulators, has made it clear it wants to do away with the industry's implied government backstop.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs